Monday, December 19, 2016

[/SI] - silver futures continuous contract

If there is anything good about the Think or Swim tool from TDAmeritrade it is the continuous futures charts which provide more history than was available in the now discontinued StrategyDesk tool.  /SI is the symbol for the silver continuous futures chart.  We can see from this that we are still in a long term uptrend which began back in 2003.  This counts as a couple of threes with the implication that we are looking at an expanding wedge in silver (a notion that I floated back in the legacy blog some time ago).

Silver came right back down to support at the start of 2016 and then had a nice bounce to middish year and now we are waiting to see where the pullback will take us.  I think that a worst case move would be to test the long term support line as shown by the bracket.  Doing this would kill the bulls off completely while opening the door for a massive explosion upward that takes off even faster than what happened in 1H 2016.

A break down below this long term support line spells near term doom for the metals complex, perhaps even ending up as a mania chart that goes to a lower low than 2002.  We can't rule it out and we must remain emotionally detached.  It is possible.  Not likely right now but we really must begin to rally here very, very soon or the odds go up quickly.

We could also see the bottom drop out of silver and do a unicorn tail to kiss that line.  This is why I stress to keep some powder dry and for God's sake no margin at this point (leverage in the 3xers is bad enough!).  Value keeping what you have more than trying to make new and you will still have cash at the bottom when everyone else is screaming that they rode it all the way down and now wish they had more cash.

Any gap down here is a sell signal, a signal that the final shakeout has begun and that we should look for support at that rising slope.

Use stops and do not curse lower prices because when you get stopped out for a small loss and then it goes down 30% more, that is actually a potential for you to make 30% off the bottom.

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